This post will explain how to capture the next generation of investors, and the assets they’re set to inherit; in order to do this, however, you will need to understand their attitudes and perceptions of investing and financial advisors.  Unless you can communicate with Millennials in the manner and language they prefer, they will find the advice they need elsewhere.

Four Investment Traits You Need to Know

 Conservative Risk Orientation

As a consequence of the financial upheaval in 2008, many Millennials are cautious investors, with 43 percent describing themselves as “conservative.”¹  In fact, 52 percent of savings held by Millennials is kept in cash.²  In a recent survey by a major brokerage firm, 40 percent of Millennial respondents characterized their investment approach as “buy and hold,” while just 15 percent said that they wanted to invest primarily in active funds to outperform the market.³

Advisor Takeaways:

• Understand their perspective, but educate them on the need for long-term growth.
• Explain how dollar cost averaging and diversification can help reduce investment risk.

Self-directed, Skeptical, but Open to Advice

Nearly three-quarters (72 percent) of Millennials describe themselves as being “self-directed,” with 41 percent reporting having no financial advisor—even though only 19 percent feel that they have a strong understanding of investing.³ Despite a predilection for self-directed investment, they are open to advice.  However, advisors should not expect to be received as some all-knowing oracle in which his or her advice is accepted without question. Your experience and past performance is not enough for many Millennials. According to a survey by Accenture, 28 percent of Millennials “would never take the advice of a financial advisor without first consulting another source.”¹

Advisor Takeaways:

• Expect Millennials to seek a second opinion on your advice.
• Encourage them to discuss what they are hearing from other information sources.

I am My Portfolio  

Almost two-thirds of Millennials feel an obligation to effect positive change.⁶  In one study, 49 percent of Millennials with more than $1 million net worth (and 53 percent of non-millionaire Millennials) said that they use social factors in making investment decisions.⁷ In pursuit of social responsibility, 65 percent of Millennial investors would sacrifice investment returns.⁸

Advisor Takeaway:

• Be proactive in asking about implementing an asset allocation with investments aligned with their social values.

Technology Matters … A Lot

The digital generation demands a superior technological experience from its wealth manager. In a recent survey by Capgemini, nearly 40 percent of respondents would consider leaving their wealth manager if it did not offer the online services they required. ⁹

Advisor Takeaway:

• Take a full inventory of the technology Millennials can use to communicate with you and manage their accounts.

 Sources:

1. Generation D: An emerging and important investor segment, Accenture, 2013
2. http://www.slideshare.net/micnews/millennial-disruption-insights-2015
3. https://www.pbig.ml.com/articles/millennials-and-money.html
4. “Millennials and Wealth Management,” Deloitte
5. http://spectrem.com/Content/Millennial-Investors-Have-Greater-Concern-Over-Social-Responsibility.aspx
6. http://www.inc.com/molly-reynolds/millennials-could-be-shaping-the-future-of-socially-responsible-investing.html
7. https://www.ft.com/content/6471723c-386a-11e6-a780-b48ed7b6126f

See referenced disclosure (2) at https://blog-dev.americanportfolios.com/disclosures/